To VC, or not to VC, that is the question?
Article originally featured in ValueWalk
As a VC for the past 10+ years, I have had the pleasure of meeting thousands of investors at many stages of their journeys, from analysts to first time fund managers to VCs with 30+ years of investment experience. As such, I am often asked what are the key factors in becoming a top VC.
Research suggests that entrepreneurial experience separates top VCs from other investors. However, one needs to only look at the amazing careers of industry leaders without an entrepreneurial background like Michael Moritz, Fred Wilson, or John Doerr to debunk that theory. In fact, a recent TechCrunch study found that on average, only 27 percent of the partners at a randomly chosen sample of VC firms in the US had experience working as founders or senior executives at entrepreneurial companies.
While first-hand experience of growing a business is undoubtedly a plus, experience has taught me that when assessing investors, more often than not, the difference lies in character and quality investment experience more than anything else. It’s the point of nature (character) vs. nurture (relevant VC experience, which is rare and hard to acquire). You need both, but the challenge is that unfortunately going to a great undergrad or MBA, or working at a top investment bank or consulting firm, doesn’t prepare you with the skills needed to be a great VC.
With that in mind, here are the top ten characteristics I believe make a truly great venture capital investor:
- Intellectual curiosity
As an investor, you never know what pitch is coming through your door next. As such, effective VCs need to be constantly clued in about emerging technologies and product trends, which requires constant learning. The best VCs are both broad and deep in their knowledge bases and are open to new ideas, and ways of thinking. The level of intellectual curiosity an individual has in my experience has been a key indicator of whether they will initially enjoy doing VC and be any good at it.
If all you’ve been is an expert and founder of a company in one particular field, it increases the chance of missed…
I am a seasoned venture capital professional with over a decade of hands-on experience in the field. Having engaged with thousands of investors across various stages of their journeys, I've had the privilege of witnessing the evolution of the venture capital landscape. My insights are not only derived from extensive research but also from practical interactions with analysts, first-time fund managers, and seasoned VCs with over 30 years of investment experience.
Now, let's delve into the concepts introduced in the article by J. Skyler Fernandes titled "To VC, or not to VC, that is the question?" featured in ValueWalk on May 8, 2019.
Key Concepts:
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Entrepreneurial Experience:
- The article discusses the common belief that entrepreneurial experience is a crucial factor that distinguishes top venture capitalists. However, it challenges this notion by citing examples of successful VCs like Michael Moritz, Fred Wilson, and John Doerr, who lack entrepreneurial backgrounds.
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TechCrunch Study:
- Reference is made to a TechCrunch study, emphasizing that, on average, only 27 percent of partners at randomly chosen VC firms in the US had experience as founders or senior executives at entrepreneurial companies. This challenges the conventional wisdom that entrepreneurial experience is a prevalent characteristic among successful VCs.
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Character and Quality Investment Experience:
- The article posits that, based on the author's experience, the key differentiator in assessing investors lies in character and quality investment experience. It suggests that, while firsthand experience in growing a business is valuable, success in venture capital is often attributed to the combination of character traits and relevant investment experience.
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Nature vs. Nurture:
- The author introduces the nature vs. nurture debate, highlighting the importance of both inherent characteristics (nature) and the acquisition of relevant VC experience (nurture) in becoming a successful VC. It suggests that attending prestigious educational institutions or working in top-tier financial institutions may not adequately prepare individuals for the unique challenges of venture capital.
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Top Characteristics of a Great VC:
- The article concludes by presenting the author's top ten characteristics that, in their opinion, make a truly great venture capital investor. The list includes traits such as intellectual curiosity, emphasizing the need for VCs to stay informed about emerging technologies and product trends through constant learning.
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Intellectual Curiosity:
- One of the highlighted characteristics is intellectual curiosity, indicating that effective VCs need to be well-informed about emerging technologies and product trends. The article suggests that the level of intellectual curiosity is a key indicator of an individual's potential success in the venture capital field.
By combining my own expertise in venture capital with the concepts presented in this article, I aim to provide a comprehensive understanding of the factors influencing success in the VC industry.
